Stocks to Watch
Week of July 26
NeuroMetrix Inc. (NURO)
Early last week, shares of NURO jumped as much as 1,086% over two days after the Massachusetts-based medical device company said its Quell transcutaneous electric nerve stimulator received “Breakthrough Designation” from the Food and Drug Administration (FDA) to treat fibromyalgia symptoms in adults.
That’s good news.
But is it 1,086% worth of good news? I don’t think so.
I think this stock is going to come back down to earth.
If NURO trades up to $24, I like shorting the stock, outright. No need to get too greedy here. I would allocate no more than 2% of risk capital to this trade, capture profits if it trades down to $12, and exit the position if it trades up to $25.
At those prices, this trade has a 12-to-1 reward/risk profile. I’ll take those odds all day, every day!
NVIDIA Corp. (NVDA)
Next up, I’m watching NVDA. You should be, too. Shares of NVDA pulled back over the last few weeks, alongside the volatility in the crypto markets. The company makes chips that are used in mining digital currency, so any major moves in the crypto market tends to impact NVDA.
In Q1/2020, the company booked $155 million in revenue from crypto mining processors. That’s a fair amount of money, but it’s only 2.74% of the $5.66 billion of revenue the company generated in the quarter.
Simply put, NVDA is juggernaut, and crypto is almost just a rounding error in the company’s performance.
If shares of NVDA come down to $178 within the next two weeks, I like buying the NVDA September 17, 2021 $180/$185 Call Spread for $2 or less.
At that price, this trade has a 2.5-to-1 reward/risk profile.
Moderna Inc. (MRNA)
Moving on, we’re watching MRNA. The Delta variant is here, and now, the new Gamma variant is starting to pop up around the world. Both of those are occurring while a large swath of Americans are still hesitant to get vaccinated and under-developed countries are struggling to roll out any sort of Covid vaccination program.
Bottom line, there’s going to be an ongoing need for Covid vaccinations for a long time, and that should be great for MRNA.
The stock jumped last week, as news of the Delta began getting more headlines. Frankly, I think it jumped a little too much, too quick. I’d like to see a small pullback before deploying any capital to a MRNA trade.
If MRNA trades back down to $316, I like buying the MRNA August 20, 2021 $315/$320 Call Spread for $2.50 or less.
At that price, this recommendation has a 2-to-1 reward/risk profile.
Starbucks Corp. (SBUX)
Of all the earnings scheduled for this week, and there are some big ones (AAPL, GOOGL, AMZN, FB, and MSFT), the one I’m watching most closely is SBUX, which is scheduled to report earnings on Tuesday (after the close).
Just last week, shares of Chipotle Mexican Grille Inc. (CMG) jumped nearly 18% on a blowout Q2/2021 results. EPS soared 1,765% to $7.46, beating FactSet forecasts of $6.53. Revenue climbed 38.7% to $1.89 billion, beating estimates of $1.88 billion.
I mention CMG because both SBUX and CMG operate in a similar space. They provide short-term indoor casual dining (or drinking in the case of Starbucks). With Covid restrictions lifted in most parts of the United States and abroad, and customers coming back into stores, I think SBUX is going to have a good quarter, but more importantly, I think it’s going to guide above analyst expectations.
Based on last week’s late week trading, it looks like traders are feeling the same way, with the stock gaining as much as 7% over the entire week. If shares of SBUX come down to $124 during Monday’s session, I like buying the SBUX August 6, 2021 $124/$125 Call Spread for $0.45 or less.
At that price, this trade has 2.22-to-1 risk/reward profile.